Should You Buy a Second Home in Napa?

The Moore Group August 5, 2014

2S3A9976_1Having a second home in Napa can be a great investment or an expensive luxury. A golf course condo or vineyard retreat is enticing while both interest rates and home prices are low. How do you decide if it’s right for you?

Make it your retirement home

If your second home is in the area where you plan to retire, buying it now, before you stop working and your income is higher might be beneficial. Beware, however, of tying up your cash or extending indebtedness beyond your retirement date; and read this article for other pitfalls associated with buying a second home before you retire.

Create a family getaway

If several family members will use the property, consider buying the property together. This concept is not without pitfalls, so make sure all family members understand how and when the property is available for use. Be sure to designate how interest in the property transfers to heirs or create a Cottage Limited Liability Plan (LLC) that governs both the use and transfer of the property. This is similar to a corporation, where members own “interest” in the property rather than the property itself. Consult an attorney when considering this option.

Income property

You might be considering buying income property. Remember that the IRS considers income property a business that has tax ramifications. Be sure to check with your financial advisor or retirement planner before investing in property that you plan to lease or rent.

Rental property ownership requires ongoing expenses, including taxes, maintenance, mortgage payments, repairs between renters, insurance, and other costs. Income property ownership may provide ongoing income and be a great investment, but consider all the expenses before jumping in.

We can help you find properties with positive cash flow, so be sure to let us know that you are looking for investment property. If you need a property management service for your new investment, we can direct you to the resources you need.

Condo hotel

Usually located on resorts or in city centers, condo hotels are used by an owner a fraction of the year; and include amenities like golf, tennis, swimming pools and spa services. Condo hotels have several ownership options. Some are fully owned, while others have shared ownership. Some are income producing, some are not. However, because most condo hotels are managed by a resort or hotel, all share the advantage of hassle free ownership.  There are disadvantages to this arrangement. Most resorts and hotels have strict requirements on decor, furnishing and upgrades to the unit, with little room for personal touch. Also, there are usually constraints on how often a condo hotel can be used by the owner. There are 4 condo hotel resorts in Napa, contact us for help identifying which resort is best for you.

Other considerations

Before you buy a second home in Napa and especially before financing a second home, review the potential for your situation to change. Is your job secure or could you be moved across the country? Does your family live near you, or near enough to the property for those family gatherings you envision? Do you have extra income to cover those empty months? Is the home in an area prone to natural disasters? Is it an area useful only during certain times of the year? If your second home is a condominium or a part of an association, can you cover the ongoing dues, assessments, or fees? Does the association require owner occupation?

We can help you determine the best investment or vacation property for your situation, so call us and we’ll get you started in the right direction.

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